ZAMBIA – Zambeef Products Plc, the integrated cold chain foods and retail business with operations in Zambia has reported a strong start of the financial year 2021, reporting 20% rise in revenue in Kwacha terms, in the half year period ended March 2021.
The group’s revenue was ZMW2.150 billion a rise from the previous year’s ZMW1.79 billion. However, in terms of the US dollars, the company’s earning was down by 21% from US$129.2 million to US$102.5 million.
The performance in US$ was adversely impacted by the steady depreciation of the local currency.
The group’s strong performance was driven by growth in the Poultry and Retail divisions.
Management continued optimising top line growth through revenue management while the continued cost control measures helped deliver strong Earnings Before Interest Taxes, Depreciation and Amortisation (EBITDA), and ensured resultant operating leverage.
“Notwithstanding, the half year period continued to present challenges in the operating environment, resulting from the Covid-19 pandemic and the previous 2020 economic uncertainties, despite greater stability compared to the second half of the 2020 financial year,” noted the company.
The rising inflation put pressure on consumer disposable income and reduced the share of wallet going towards food spend.
Supply constraints on some of Zambeef’s product lines further put pressure on cost of inputs.
Despite the challenges, Zambeef delivered operating profit, including discontinued operations, of ZMW175.6 million (USD8.37 million), equating to a growth of 51.3% in kwacha terms and a flat performance of 0.3% growth in US dollar terms, compared with ZMW116.1 million (USD8.35million) in HY2020.
The operating profit excluding discontinued operations was ZMW154.8 million (USD7.4 million) compared to ZMW125.5 million (USD9.0 million) achieved in the previous half-year period.
Retail and cold chain division saves the day
Looking at the performance of the group’s individual segments, its retail and cold chain food products division, registered a revenue growth of 29% and operating profit growth of 61% in kwacha terms.
The division experienced supply challenges during the period which resulted in inputs price increases. As a result, volumes declined across product categories. However, demand for products was high as they remained competitively priced.
Meanwhile in the stockfeed division trading under the brand name Novatek, attained a revenue growth of 17% above prior year mainly due to price, as volumes remained flat on prior year.
The demand for poultry feed reduced following a day-old chick supply shortage across the market. An export ban on animal feed from Zambia resulted in a further slowdown of production volumes.
However, fish feed continues to register exponential growth following the sector specific lifting of the export ban and government’s efforts to make Zambia a regional player in the aquaculture sector.
Lastly, the cropping business registered a decline in revenue due to the timing of wheat sales and the impact of the sale of Sinazongwe farm.
However, operating profit increased in kwacha terms despite the decline in dollar terms.
Zambia experienced a good rainfall season and the yield on the summer crop is expected to be in line with expectations.
Overall, Zambeef’s bottom-line performance was impressive as it attained an increase in profit in both Kwacha and US dollars terms, registering a 2420% rise from ZMW2.1m to ZMW53.9m and 1569% jump from US$ 40.154m to US$ 2.57m.
Although the company expects the macroeconomic situation to remain volatile, it hopes for more stability in the medium term than what they experienced in the second half of 2020.
“The Covid-19 pandemic and how it evolves will continue to be an important factor in how we perform for the remainder of the year.
“We believe that a healthy, sustainable and profitable growth trend can only be achieved when we work together with our partners, communities and customers,” said Michael Mundashi, Chairman Zambeef.
Despite the macro-economic headwinds and uncertainty caused by the Covid-19 pandemic, Zambeef’s underlying performance is expected to remain resilient.
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